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Invert Insights December 15, 2023

Fossil fuel deal, new carbon market guidance, an energy transition accelerator, and cow burps

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Fossil fuel deal, new carbon market guidance, an energy transition accelerator, and cow burps

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  • COP28 Ends with Deal on Transition Away from Fossil Fuels
  • US Commodity Regular Proposes Plan to Boost Scrutiny of Carbon Credit Markets
  • New Framework for the Energy Transition Accelerator Launches at COP28
  • Canada Wants to Make Cows Burp Less to Fight Climate Change

COP28 Ends with Deal on Transition Away from Fossil Fuels

The COP28 climate talks in Dubai concluded with a historic deal committing the world to transition away from all fossil fuels for the first time. The president of the summit, UAE’s Sultan Al Jaber, brokered an agreement strong enough to convince the U.S. and European Union on the need to curb fossil fuel use, while keeping oil producers like Saudi Arabia on board. The deal, known as the “UAE Consensus,” while falling short of specific fossil fuel phase-out targets, marks a significant shift as no previous COP text had mentioned moving away from oil and gas. The outcome, however, faces skepticism regarding implementation, and some small island nations feel it only takes incremental steps toward phasing out fossil fuels, expressing concerns about the focus on carbon capture and storage and the potential endorsement of natural gas use.

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The COP28 agreement in Dubai, although falling short of specific phase-out targets for fossil fuels, represents a groundbreaking shift in global climate discussions. The emphasis on transitioning energy systems away from fossil fuels sends a powerful signal to investors about the future of energy markets. While some nations expressed concerns, the agreement’s success will ultimately depend on the commitment and actions of investors, consumers, and national governments toward a low-carbon energy system. The diplomatic success of the UAE in brokering this deal highlights the challenging balance between accommodating oil-producing nations and pushing for substantial climate action. 

US Commodity Regular Proposes Plan to Boost Scrutiny of Carbon Credit Markets

The U.S. Commodity Futures Trading Commission (CFTC) has proposed guidance for companies seeking to list voluntary carbon credits for trading. The proposal outlines expectations for CFTC-registered markets dealing with carbon credits, aiming to enhance oversight of voluntary carbon markets amid concerns about quality and double counting. As of November 2023, 18 futures contracts for voluntary carbon market products have been submitted for listing with the CFTC. The comment period for the proposal will continue until February 16, allowing stakeholders to provide input on the regulatory framework.

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The CFTC’s proposal reflects growing calls for increased oversight of voluntary carbon markets, particularly as concerns arise about the credibility of carbon credits. The plan emphasizes the need for quality standards, transparency, and verification processes to ensure the legitimacy of carbon credits traded in the market. The move aligns with global efforts to address climate change, with Treasury Secretary Janet Yellen expressing support for the proposal as a crucial step toward promoting the integrity, liquidity, and responsible innovation in the trading of voluntary carbon credits.

New Framework for the Energy Transition Accelerator Launches at COP28

At the COP28 climate negotiations, the U.S. State Department, in collaboration with The Rockefeller Foundation and Bezos Earth Fund, unveiled the Energy Transition Accelerator (ETA) framework. The program aims to mobilize funds through the voluntary carbon market to support developing countries in transitioning to cleaner energy sources, addressing the urgent need outlined in the Global Stocktake for increased investments in renewable energy and the avoidance of fossil fuel infrastructure.

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The launch of the ETA reflects a recognition of the pressing need to accelerate investments in the global energy transition, as highlighted by the Global Stocktake. The initiative’s innovative approach involves harnessing private capital through corporate climate action, acknowledging that public funding alone may not be sufficient. The emphasis on creating high-quality carbon credits and collaboration with standard-setters underscores the commitment to ensuring rigor and impact in promoting real global emission reductions.

Canada Wants to Make Cows Burp Less to Fight Climate Change

The Canadian federal government is proposing financial incentives for farmers to reduce methane emissions from beef cattle operations by improving animal diets, management, and other strategies. The plan involves offering offset credits to farmers for implementing measures such as changes to cattle diets, the addition of minor ingredients to improve performance, and the use of growth promoters. Methane contributed about 13% to Canada’s total greenhouse gas emissions in 2021, with more than 95% of those emissions coming from oil and gas, agriculture, and waste or landfills.

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The initiative to reduce methane emissions from cattle, a significant contributor to Canada’s greenhouse gas emissions, reflects a growing global focus on sustainable agriculture practices to mitigate climate change. By providing financial incentives through carbon credits, the government aims to encourage farmers to adopt practices that not only reduce methane emissions but also enhance overall animal efficiency and productivity. This approach aligns with broader efforts to address emissions from various sectors, showcasing the multi-faceted approach needed to achieve climate goals.

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